Abstract
Do financial crises promote or hamper transatlantic regulatory cooperation in banking? This article argues that financial crises have an impact upon the alignment of regulatory preferences of the United States (US) and the European Union (EU), causing an ‘ebb and flow’ in transatlantic cooperation. When EU-US preferences are broadly aligned in periods of financial stability, transatlantic regulatory cooperation is intense. It is relatively easy for the EU and US to agree on market-friendly regulation promoted by banks. When preferences are different, especially in the context and aftermath of the exogenous shock of financial crises, transatlantic cooperation is more problematic because crises re-assert the importance of nationally embedded patterns of market organisation.
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References and Notes
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US policy-makers prefer the expression ‘substituted compliance’ instead of ‘mutual recognition’. The EU often uses the concept of ‘equivalence’ (See Ferran, E. (2012) Crisis-driven regulatory reform: Where in the world is the EU going? In: E. Ferran, N. Moloney, J.G. Hill and J.C. Coffee, Jr. (eds.) The Regulatory Aftermath of the Global Financial Crisis. Cambridge: Cambridge University Press; Qaglia, L. (2015) ‘The politics of “third country equivalence” in post-crisis financial services regulation in the European Union’, West European Politics 38(1): 167–184.), whereby if third country rules are deemed to be equivalent to EU rules, foreign firms providing services in the EU are not subject to EU regulation in addition to their home country regulation. Mutual recognition does not necessitate reciprocity, though de facto this is often the case (see Verdier, P.H. (2011) Mutual recognition in international finance. Harvard International Law Journal 52(1): 55–109).
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Acknowledgements
Lucia Quaglia wishes to acknowledge financial support from the British Academy and Leverhulme Trust (SG 120191) and the Fonds National de la Recherche in Luxembourg (Mobility-in fellowship). Part of the research for this article was conducted while she was Visiting Fellow at the Hanse Wissenschaftskolleg. The authors would also like to thank Huw Macartney, Rachel Epstein and the other contributors to this special edition, for their helpful comments and constructive criticism on this article.
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Howarth, D., Quaglia, L. The ‘ebb and flow’ of transatlantic regulatory cooperation in banking. J Bank Regul 17, 21–33 (2016). https://doi.org/10.1057/jbr.2015.21
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DOI: https://doi.org/10.1057/jbr.2015.21